Biden Warns of ‘Very Bleak’ Future Without Stimulus
President-elect Joe Biden on Friday called for “urgent action” on a coronavirus-relief package, indicating that lawmakers should pass a bipartisan compromise package as a “down payment” toward additional coronavirus aid after he takes office.
“Americans need help and they need it now,” the president-elect said Friday. “And they need more to come early next year. But I must tell you I am encouraged by the bipartisan efforts in the Senate around a $900 billion package for relief.”
Biden warned that without quick action to provide relief as Covid cases surge across the country, “the future will be very bleak.”
Biden made clear that he would seek to work with Republicans to provide more economic stimulus next year. “Congress and President Trump must get a deal done for the American people, but any package passed in the lame duck session is not enough. It’s just the start,” he said. “Congress will need to act again in January.”
Biden said he was confident that he’ll be able to get Republicans to go along with an additional Covid package next year because the need will be so dire.
He also touched on the deficit concerns that have been raised by some Republicans in arguing against additional stimulus. “By acting now, even with deficit financing, we can add to growth in the near future,” he said. “In fact, economic research shows that with conditions like today’s crisis — especially with such low interest rates — not taking the actions I’m proposing, will hurt the economy, scar the workforce, reduce growth, and add to the national debt.”
Pelosi says “there is momentum” toward a deal: House Speaker Nancy Pelosi on Friday said that momentum is building on Capitol Hill toward a coronavirus relief deal and defended her past handling of negotiations, including her pushback on a White House offer of about $1.8 trillion, larger than the deal now being discussed.
At her weekly press conference, Pelosi (D-CA) said she had spoken with Senate Majority Leader Mitch McConnell (R-KY) by phone on Thursday and said talks were making progress after a bipartisan group of lawmakers earlier this week proposed a $908 billion compromise deal.
“There is momentum,” Pelosi told reporters. “And so I am pleased that the tone of our conversations is one that is indicative of the decision to get the job done.”
Aid to state and local governments, which many Republicans oppose, and a “liability shield” protecting businesses and hospitals from coronavirus-related lawsuits, which Democrats have rejected, remain contentious issues. Negotiators have agreed that aid to state and local governments should be tied to a jurisdiction’s loss of revenue, not its population, The Washington Post reports.
‘Not a Mistake’: Pelosi said her handling of earlier talks was “not a mistake” and explained that she was now willing to accept a smaller deal — the sort she had long rejected — because the election of Joe Biden as president and the development of promising vaccine candidates had changed the dynamic, creating the promise that an additional Covid-related rescue package could be done next year.
“With a Democratic president committed to a scientific solution for this, with the idea that we will have a vaccine, it’s a complete game-changer from then,” she said.
After months of stalemate, Pelosi said that Congress would not leave for the upcoming holidays without reaching a deal. “We must get it done before we leave,” she said. “We cannot leave without it.”
Sanders comes out against $908 billion package: As lawmakers scramble to reach a deal, the latest coronavirus relief plan still faces plenty of hurdles. Sen Bernie Sanders (I-VT) on Friday said he would vote against the compromise package and would require significant revisions before he could support it.
The framework being considered doesn’t include another round of $1,200 direct payments. “Tens of millions of Americans living in desperation today would receive absolutely no financial help from this proposal. That is not acceptable,” Sanders said in a statement.
Some conservative lawmakers have also come out against the proposed package. “There’s widespread opposition among conservatives, particularly among our activists who are sick of Congress spending money we don’t have,” Jason Pye, vice president for legislative affairs for FreedomWorks, a conservative advocacy group, according to The Washington Post.
What’s next: Negotiators hope to reach a deal and release the legislative text by Monday. Pelosi and McConnell hope to tie the coronavirus-relief legislation to a broader, $1.4 trillion omnibus spending package, but time is running short. “The sheer number of outstanding items at such a late stage makes it increasingly likely that congressional negotiators will require a brief stopgap spending bill to complete their work before leaving for the holidays,” Politico reports. “Such a decision could be made early next week if lawmakers fail to make significant progress over the weekend.”
Economy Flashing Yellow Lights as Job Growth Slows
The U.S. economy added a disappointing 245,000 jobs in November, the Labor Department announced Friday, the weakest job growth since the economy started recovering in May from the first wave of coronavirus shutdowns.
Job growth has declined for five months in a row, raising alarms about the waning strength of the recovery and the fate of millions of workers who have lost their jobs in an economy still battered by the Covid-19 pandemic. The U.S. remains about 10 million jobs short of its peak in February, and 11 million shy of the trend line in place in the pre-Covid economy.
The unemployment rate fell by two-tenths of a percentage point to 6.7% in November, but the decline was driven largely by more than half a million workers leaving the labor force. According to an analysis by Jason Furman, who served as chair of the Council of Economic Advisers in the Obama administration, a more realistic unemployment measure that takes into account those who have dropped out puts the jobless rate at 8.5%.
A worrying trend: The number of people experiencing long-term unemployment has been rising sharply. “The jobs report offers clues that what was once temporary unemployment is becoming more permanent — in ways that, if unchecked, could do long-term damage to millions of families and to the economic potential of the United States,” Neil Irwin of The New York Times wrote.
Since September, the number of people jobless for more than 27 weeks has risen by 1.5 million, and some economists fear that the job market will get worse before it gets better. “The recovery is not insulated from the effects of the pandemic,” Daniel Zhao, an economist at Glassdoor, told the Associated Press. “This is the calm before the storm. We face a long and difficult winter ahead.”
Biden calls for more stimulus: President-elect Joe Biden said the report underscores the need for Congress to provide further stimulus. “This is a grim jobs report. It shows an economy that is stalling. It confirms we remain in the midst of one of the worst economic and jobs crises in modern history,” Biden said in a statement.
Senate Democratic leader Chuck Schumer also cited the latest employment numbers as he pushed for a deal. “This jobs report is blaring warning that a double-dip recession is looming and must be a wakeup call for anyone who is standing in the way of true bipartisan emergency relief,” he said in a statement.
Rep. Tom Cole, a Republican from Oklahoma, agreed on the implications of the report: “I think today’s jobs numbers really help” the effort to pass another round of stimulus. “We may disagree about the specifics but there is no doubt the economy needs help.”
The conservative U.S. Chamber of Commerce said the “slumping economy” makes it clear that lawmakers need to reach a deal quickly. “The fire alarm is sounding on our economy and the only question is whether Congress will respond,” a Chamber representative said in a statement. “The time for Congress to move a bipartisan bill is now. The U.S. Chamber strongly urges lawmakers to support bipartisan efforts to enact pandemic relief ...”
Blue and Red States Face Deep Budget Cuts
The bipartisan relief proposal being discussed on Capitol Hill calls for providing $160 billion in aid to state, local and tribal governments. The New York Times’ Patricia Cohen writes that, contrary to some GOP objections to a “blue-state bailout,” it is not just Democratic-led states that are in dire need of federal help in dealing with the coronavirus pandemic and the resulting budget crises that threaten to force deep cuts:
“Governors, mayors and county executives have pleaded
for federal aid before the end of the year. Congressional Republicans have scorned such assistance, with the Senate majority leader, Mitch McConnell of Kentucky, calling it a ‘blue-state bailout
“But it turns out this budget crisis is colorblind. Six of the seven states that are expected to suffer the biggest revenue declines over the next two years are red — states led by Republican governors and won by President Trump this year, according to a report from Moody’s Analytics.
“Those on the front lines agree. ‘I don’t think it’s a red-state, blue-state issue,’ said Brian Sigritz, director of state fiscal studies at the National Association of State Budget Officers. …
“In reality, the degree of financial distress turns less on which party controls a statehouse or a city hall than on the number of Covid-19 cases, the kinds of businesses undergirding a state’s economy, and its tax structure.”
Read more at The New York Times.
Time to Stop Worrying About the Deficit?
We told you earlier this week that the debate about the national debt and deficits has heated up again and is bound to color policy discussions for the incoming Biden administration. The get a preview of the coming clashes, tune into Bloomberg TV tonight at 7 p.m. ET for an actual debate on the issue produced by Intelligence Squared U.S. The motion being debated: "Stop Worrying About National Deficits."
Arguing for the motion are Stephanie Kelton, an economics professor at Stony Brook University and a leading proponent of Modern Monetary Theory, which holds that deficit fears needlessly prevent fiscal policy from responding to economic needs. She’s joined by James Galbraith, an economist at the University of Texas at Austin and former executive director of the Joint Economic Committee in Congress.
Arguing against them are Todd Buchholz, director of economic policy under President George H. W. Bush, and Otmar Issing, former chief economist of the European Central Bank.
Below are selected highlights from their arguments. Video of the debate will be available Monday at https://intelligencesquaredus.org/.
Kelton: “When the government eliminates deficits, balances its budget or moves it into surplus, then it's operating its budget like a vacuum, it's hoovering those dollars away from the rest of us. And that reduces our wealth. So think about whether you want the government to be running deficits which produce your surpluses, or whether you'd prefer them to hoover away some of the financial assets that you hold. …
“No one is arguing for unbridled deficit spending, out of control, never-ending larger and larger deficits. Deficits can be too big. And inflation can be evidence of a deficit that's gotten too big. But deficits can also be too small, and evidence of a deficit that is too small is unemployment. That's what we have today. And that's what Dr. Galbraith and I would like to convince you of. Let's worry about the unemployment and the death and the depressed economy, not the government deficit.”
Galbraith: “What we did in 2020 when we were hit with a pandemic was utterly remarkable. In the United States, we poured over $2 trillion into the economy, over 10% of our national income, to support people's income, to replace their lost wages, to keep them in their homes. We're running out of money now. We need to put some more in. It's as simple as that. To say we can't do it for some reason that wasn't apparent seven months ago is a sad proposition which has no foundation in any reality that we're currently facing.”
Buchholz: “No one believes during a pandemic that we should cut spending, or be concerned about the deficit. That is not today's discussion. Having said that, our concern is that Modern Monetary Theory says that you should engage in reckless grand spending even in good times, and it interests populist politicians with far too much power to do ill. …
“We are confronting a situation where the next 10 years, Social Security and Medicare in the U.S. — those trust funds will go dry. And there will be automatic spending cuts if nothing is done. Now our colleagues here say, well, we can keep spending until inflation shows up. I would like to ask why is it our distinguished colleagues have so much trust in politicians to do what politicians hate to do, that is, cut spending and raise taxes when inflation comes?”
Issing: “A renowned German economist once remarked, expecting public politicians to resist the temptation of free public spending is like expecting a dog to sit disciplined before a box of sausages. … The proposal to ignore public deficits and debt is pure populism, promising a land of milk and honey, the surest way to undermine and ultimately destroy the value of currencies.”